Brad Feld

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Would You Want It If It Were Free?

Jul 05, 2009

The meme of “Free” is one again making the rounds.  I expect it reignited when Chris Anderson’s new book Free: The Future of a Radical Price (available on Amazon for $17.81) quickly followed by Malcolm Gladwell’s semi-scathing review in the New Yorker titled “Priced to Sell.  Is Free the future?”  (I kind of feel like Gladwell wimped out on the review, even though I like Anderson’s point of view better than Gladwell’s.)  This then created a predictable tussle in the blogosphere, the kind of which I find tedious and dull, so I avoided the rest of it.

Over the weekend I saw two more blog posts on this meme.  The first – by Fred Wilson titled Freemium and Freeconomicsis clear and well written (and free).  It’s then followed by an excellent comment thread.  The second – by Marc Cuban titled When you succeed with Free, you are going to die by Free (also free) is a muddy as Fred’s is clear (and the comments are much less interesting).  Nevertheless, both are relevant and insightful.

Whenever I see this meme rise its head, I think of a line I use whenever I consider an investment or an acquisition of another company.  “Would You Want It If It Were Free?”  I learned this from Len Fassler, one of my early mentors who acquired my first company (fortunately he decided it was worth more than free).  Before I make an investment, or support an acquisition, I sit quietly and ask myself “would I want this if it were free?”  By this, I don’t mean as a customer, but rather “would I invest in this at a $0m pre-money valuation” or “would I want 100% ownership of this company if it cost me $0.”

Over the past 15 years, I’ve found my answer to this question to be “no” more times than I can remember.  It often surprises me when I realize this, as up to that point in the conversation, investigation, or negotiation I’d been focusing on “the deal” rather than “whether or not I perceived any value in the company being discussed.”  When I reflect on some cases that I remember, I realize how my internal rationalization machine had kicked into high gear as I got excited about “a transaction”.  By taking the transaction out of my thought process, I could focus on the essence of value (or lack thereof).

Of course I’ve been wrong (both directions) plenty of times.  But I can think of a bunch of situations where asking myself this question saved my ass or that of the company I was involved with that was considering an acquisition.

I realize this is a different version of free than the one Anderson, Gladwell, Wilson, and Cuban are discussing.  But, if you step back and think hard about it from a customer perspective, it magically becomes relevant.  Certainly lots of people “would try it if it were free”, but do they actually want it?